Strength in numbers: Class actions

On Friday 7^th September 2018, Tom Goodhead, managing partner of group litigation practice PGMBM, was watching the news. The BBC reported British Airways had revealed its security systems had been breached, leading to the leaking of personal data including names, credit card numbers, addresses and email addresses – with 420,000 customers potentially affected. Goodhead reached for his phone. “My team worked overnight, analysing the case and the likely damages,” he recalls. “By Saturday morning, we had a website up and running, and we were advertising [for claimants] on Facebook and Google.”

The firm attracted more than 16,000 claimants, and the claim that ensued – which successfully settled in July for an undisclosed sum – is considered to be the biggest legal action for data breach in the UK so far. The settlement did not include any admission of liability by BA.

Group litigation over data breach is booming in the UK; but that’s not the only area giving rise to some eye-wateringly large claims. Other mammoth  cases currently underway include claims against various car manufacturers over  emissions testing, including a claim against VW brought on behalf of 90,000 claimants; equal pay actions against a number of supermarkets including a claim by 45,000 store workers against the supermarket Asda; and in the Competition Appeal Tribunal (CAT), a series of ‘truck cartel claims’ against truck manufacturers found to have engaged in price-fixing, plus a whopping £14m claim against Mastercard relating to alleged overcharging.

Structural calculations

What is the best way to structure a group claim? Gareth Pope is head of collective actions at Slater & Gordon, which is running the emissions claim against VW. Leaving aside specialist areas such as competition law and employment law, Pope explains that there are essentially three ways to run a group claim. “The first is to litigate each claim individually,” he says. “You can group it so that you select, say, two or three of your better claims, and stay the rest pending the outcome of those. That’s how we used to do it.”

But with the claim against VW, the firm felt it would be better to use a second method, the ‘group litigation order’ (GLO). “We had 70,000 clients on the VW case. We thought it was suitable for a GLO, because it was harder for people to get expert evidence, against the value of their claim. Also, by grouping the claimants [under a GLO], that makes it much more attractive to litigation funders”.

Under a GLO, all individual claimants need to sign up to the group register. Judgments, orders and directions are binding on all the claims in the GLO, and the court can order generic issues to be dealt with by selecting particular claims as test cases.

But the GLO system isn’t perfect. Goodhead laments: “The GLO regime just isn’t set up for the volume of claims being generated… Say you’ve got a claim with £100,000 claimants. That’s the size of a small town. It’s inherent that during the course of the litigation, hundreds of claimants will die; hundreds will discontinue their claim, perhaps for personal reasons; hundreds won’t be able to find their documents. But we see defendants litigating as if it were a single claim, which racks up costs.”

Defendants will seize upon any minor error in an individual claim form, for example. “At the moment, we’re seeing ludicrous costs being incurred because of these battles in GLOs,” complains Goodhead. “But here has to be some pragmatism”.

Pope agrees: “The defendants’ position is always that they need to know who is suing them, and what they’re suing them for. There’s a propensity for them to tie up these claims in an endless amount of admin. Getting, and correcting, details from 90,000 claimants is a time-consuming exercise”.

Both Goodhead and Pope would prefer the courts to look at the generic issues first, before dealing with individual claimants. And there is a positive step in that direction north of the border: “In Scotland, they’ve recently had their first Case Management Conference in the [emissions] claim against VW,” reports Pope. “The Scots appear to have taken a leaf out of the Australian book, and said, we will litigate the issue first, and deal with the client stuff at the end. That’s a better approach.”

The third way to structure group litigation is through a “representative action”. This is an ‘opt-out’ procedure – which means that, rather than needing every claimant to come forward and put their name to the case, it can be brought on behalf of a class of people who haven’t actually signed up to it. The lawyers bringing the claim simply need to find one individual to ‘represent’ the many others in the same situation. If they succeed in their action, they must then take steps to advertise the outcome, so that anyone in the affected class can claim their share of the compensation. It’s also possible for consumers to “register an interest” in the claim, if they wish to follow its progress.

“We’re seeing more of this type of claim at the moment,” observes Pope. “It’s good for those claims where lots of people are impacted, but the damages are quite low”.

Goodhead is not so keen: “We’ve never brought a representative action, because we take the view that they’re more speculative. You’re relying on the court to agree to a single person being the representative, and then that will inevitably get appealed. We prefer a GLO, because claimants are actively making a choice to litigate. It feels a lot more engaging when you’ve got 10,000 or even 100,000 people who have actively chosen to engage with us.”

A gamechanger

While representative actions have existed for some time, their use was narrowly restricted until one very big case came along seeking to change that: Lloyd v Google. Group litigators are now anxiously awaiting the Supreme Court’s decision in this case, which will determine the broader fate of opt-out representative actions.

Lloyd v Google is a huge representative action in which Richard Lloyd, a former executive director of consumer group Which?, is suing Google over a breach of its data protection duties, on behalf of a class of 4.4m affected iPhone users. The case was heard in April, with a ruling expected this autumn.

Ivan Shiu, a partner at Hogan Lovells who defends group data breach claims, asserts that the ruling could be a ‘game changer’ for representative actions. “Will the Supreme Court uphold the Court of Appeal decision that these opt-out representative actions may proceed, or will it reject them? If it upholds the CA decision, it will be a dramatic shift. Things will be a lot harder for defendants,” he suggests.

Shiu says legal uncertainty around how mass actions can be brought is the biggest challenge that data breach defendants face at the moment. But if the Supreme Court rules conclusively that opt-out representative actions should be allowed, that won’t necessarily put an end to the confusion. “There’ll still be great uncertainty as to legal and procedural matters,” he warns. “There’ll be arguments as to how these cases should be case-managed.”

Shiu points to the competition law arena, where the Consumer Rights Act 2015 introduced an opt-out regime for domestic class actions. “The rules of the CAT govern such claims and, although it’s been tested in the courts, there’s a procedure set out for all to see.

“But we won’t have that when it comes to data class actions, if the Supreme Court allows them. There’s no statute or rulebook that governs such claims and their case management. So you end up with the situation where parties bringing and defending claims will have to feel their way, guided and directed by the court, with the likelihood of legal wrangles.”

In data breach claims, defendants tend to be companies that handle large amounts of consumer data. So in an opt-out claim, the potential class of claimants could be very large indeed. “‘These actions may involve hundreds of thousands or millions of claimants within the class, all represented by a single representative claimant. The claims may seek damages in the tens or hundreds of millions,” remarks Shiu.

He adds: “There’s the legal question of whether a representative can represent millions of people. One of the arguments is that it may be nonsensical to talk about a class of, for example, millions of claimants. The alleged losses across a claim of this size will not be uniform.”

When Lloyd v Google was heard at first instance by Warby J in October 2018, he flatly rejected it. Shiu explains: “In the first instance decision, one of the reasons that Mr Justice Warby held that the claim should not be allowed to proceed on this opt-out basis was that it was ‘officious litigation’ brought on behalf of people who had not consented to it and had shown no interest in it, with the main beneficiaries being the lawyers and the funders. The judge also held that there were issues of proportionality when the damage sustained and the compensation recoverable by each individual would be modest at best.”

When Warby J’s decision was reversed by the Court of Appeal a year later, many lawyers were stunned – but claimant solicitors soon sprang into action. “The Court of Appeal judgment [allowing the claim against Google to proceed] was published on 2 October 2019,” recalls Shiu. “A representative action was issued against one of our clients on behalf of an alleged class of up to 15 million claimants only two days later… Perhaps around a dozen of these representative actions have since been issued, with many others threatened.”

Whether the daunting size and number of these new data breach claims - which will be destined for the High Court’s already stretched Media and Communications List – will influence the Supreme Court’s thinking in Lloyd v Google remains to be seen. “It’s a legal issue for the Justices of the Supreme Court, and that will include issues of public policy,” notes Shiu.

A slow start

As Shiu points out above, competition claims in the CAT have had their own special framework for an opt-out representative action regime since 2015. So how is this working? “It’s been a very slow start,” acknowledges Nicola Boyle, competition partner at Hausfeld. “The first principles inevitably go to appeal”.

The CAT has been rather bogged down by Merricks v Mastercard, the mind-blowingly large £14bn claim against Mastercard on behalf of a potential class of 46m people, relating to a previous finding by the European Commission that it had breached competition law.

The case threw up a number of questions surrounding the legal tests that the CAT should apply when deciding whether to certify collective proceedings; including whether the huge class of claimants could be considered to have the ‘same interest’ in the litigation, as the rules required. In December, the Supreme Court ruled that Merricks did qualify for the collective action regime and sent it back down to the CAT to be heard again, with some helpful guidance on how the rules should be interpreted. Meanwhile, the traffic jam of cases that had all been stayed awaiting the Supreme Court’s decision in Merricks has now begun edging forward for decisions on certification. “We’ll see some momentum to the regime now,” predicts Boyle optimistically. 

Employment conditions

Another key area for collective actions is employment law. “Legal aid isn’t available, and the individuals don’t tend to be people who’ll have vast sums in reserve to be able to pay for legal advice. So pooling the strength of individuals is the only way to get access to justice,” observes Michael Newman, a partner at Leigh Day, who is bringing the claim against Asda on behalf of 45,000 store workers (primarily women), who argue that they should have been paid the same as warehouse staff (mainly men).

In the Employment Tribunal, where each party pays their own legal costs regardless of whether they win or lose, there’s no special legal framework for group claims, and no GLOs, he explains.

“There’s no specific set of rules, but over time, solicitors and judges have worked out various systems. Normally you’ll have a register that lists who the claimants are, and what claims they’re bringing. Then we’ll often proceed using multiples. So, for instance, you might take the first 1,000 as a group, and actively work on those cases. The rest of them you might stay; and when you have the outcome, apply this to everyone else.”

Employment group actions will often make use of ‘lead claimants,’ adds Newman. In a supermarket-related claim for example, you might select a lead claimant for each category of worker, such as baker, shop assistant, replenishment staff, and warehouse staff. If their claim wins, the other claimants in their category should also win. “You need someone who’s willing to act as lead claimant,” Newman points out. “I say to them, just talk about your job - winning the case is up to us. But, of course, they do know the total number of claims, so it’s a lot of pressure for them. They have to give evidence and will be cross examined. Sometimes they’ve been nervous, or even terrified.”

Newman would like to see an “opt-out” system introduced for employment claims. He muses: “If you take the equal pay claim against Asda; every individual has to come forward and instruct a lawyer… That’s 45,000 claimants. If successful, it will only be those claimants who will get the remedy.”

So there might be thousands of other employees who were also underpaid, but as they did not bring a claim, the employer is under no obligation to address the injustice they suffered. “If you had a situation where out of 100 employees, 99 had brought claims, but one didn’t hear about it, then they don’t get the pay rise. That, to me, seems odd,” he remarks.

Management challenge

How do law firms set up these large group actions? The trigger for a claim will often be a finding of a regulatory breach; and claimant lawyers keep a constant eye on the fines and rebukes meted out by the Financial Conduct Authority and Information Commissioner’s Office, for example.

Lawyers are also approached by people whose lives have been affected by a particular faulty product, who have often already grouped together through Facebook or other social media, and need a lawyer to represent them.

In the employment sphere, the best way to build up the claimant base is through the employees themselves. Newman says: “We’re very reliant on word of mouth – people sharing the information with colleagues.” This can be more challenging, depending on the type of employer: “In somewhere like Asda, there’ll be a canteen where employees have the opportunity to chat [and share information on the claim]. But sometimes there isn’t a workplace at all. For instance, for Deliveroo drivers, there’s no canteen, and you might not meet another courier all day. Their networks tend to be via apps.”

Newman adds that the firm also uses trade unions, billboards and social media; and he used to conduct roadshows, but now these are done over Zoom.

When it comes to servicing this huge client base, all group action firms will provide regular round robin updates to claimants; and will also have teams of people, often paralegals or sometimes customer care staff, tasked with communicating directly with individual clients. 

Firms are also using technology to help as much as possible. Slater & Gordon has developed a portal for its VW emissions claim, enabling claimants to upload their evidence themselves, while AI technology lets the system drag across information from the DVLA when the client enters their vehicle registration. The firm has also set up a committee of five claimants, to whom the thousands of others have delegated their authority. “At the beginning of the claim when people are joining, we put out an email saying, who wants to volunteer for the committee? They do a really good job. We take instructions from them, and they hold us to account. It’s not paid, it’s completely selfless; and without them, we couldn’t have the group action,” says Pope.

Regardless of the tensely awaited outcome in Lloyd v Google, mass actions look set to continue to become more prevalent, in one form or another. Lawyers cite data breach, financial mis-selling, product liability and equal pay and workers’ rights as fertile areas for future growth.

But for those who look at the surge in such claims with disdain, it’s worth noting that the root cause of these claims is the bad behaviour that led to the initial finding of regulatory breach, or an adverse court ruling. If that behaviour didn’t take place, such actions wouldn’t exist. As Newman puts it: “We wouldn’t have equal pay claims if women weren’t getting paid less than men”.

Rachel Rothwell is a freelance journalist