Transatlantic litigation: collective redress - a comparison between the UK and the US

Posted: 03/09/2018

The US has a long history of class action litigation. The first indication of a court recognising its ability to collectively redress a class of people came in the landmark 1853 case of Smith v Swormstedt [57 US 16 How 288], where it was held that for the sake of both justice and convenience, courts should allow a representative to sue or be sued on behalf of all those who were similarly situated, with the resulting judgment binding on all members of the group.

In an effort to provide more uniformity in the conduct of collective redress cases, formal introduction of a class action mechanism took place in 1938, with the enactment of Rule 23 of the Federal Rules of Civil Procedure (FRCP). The implementation of this rule paved the way for a defined procedure to deal with collective actions in federal courts. Most states have enacted standards in line with Rule 23 that govern class action proceedings in their respective courts. The class action regime is now firmly embedded in the legal system and culture of the US.

The availability of collective redress in the UK (specifically England and Wales) is a much more recent phenomenon. With few exceptions, until October 2015, there was not an appropriate mechanism in place for cases to be brought as group actions, as they are known in the UK. It was not until the enactment of the Consumer Rights Act 1985 (CRA) that a proper collective action procedure was introduced. Whilst the UK perceives its transatlantic neighbour to have a more litigious culture, increasingly a significant number of group action claims have arisen in the UK, stemming from the alleged mis-selling in the financial services sector, shareholder unrest over corporate acquisitions and product liability cases.

In England[1], group actions are a type of collective redress in which multiple claimants and/or defendants enter into civil litigation together. Group actions may be pursued through a variety of different mechanisms in this jurisdiction. The availability of these different mechanisms, alongside a growth in the third party litigation funding market, has led to a significant increase in the prevalence of group actions.

Commencing proceedings

England
One of the principal advantages of pursuing a group action in England is the different procedural avenues available to group claimants. Each group action mechanism is governed by separate procedural requirements, as summarised below:

• Group litigation orders
  Established in 2000, a group litigation order (GLO) is an order of the court which certifies that the court may manage claims together. In order for it to grant a GLO, the court must be satisfied that the claims “give rise to common or related issues of fact or law”. Group parties may apply to the court for a GLO before or after any claims have been issued. Alternatively, the court may make a GLO using its own initiative.
  
  
• Case management powers
  Alongside GLOs and representative actions, group proceedings may be entered into under the Civil Procedure Rules (CPR) using the court’s case management powers. This will be a suitable mechanism for group parties where claims can be "conveniently disposed of in the same proceedings".
  
  Although permission of the court is not required to issue proceedings where this threshold is satisfied, permission should be sought where additional parties are added to the proceedings following service of the claim form.
  
  
• Competition Act 1998
  Group actions in England may also be initiated in the Competition Appeal Tribunal (CAT) for breaches of anti-competition law on an opt-in and opt-out basis. This form of collective redress derives from the legislative and procedural framework set out by the Competition Act 1998 and the Competition Appeal Tribunal Rules 2015 (SI 2015/1648) (CAT Rules).
  
  Under section 47B(6) of the Competition Act 1998, collective actions may be commenced where there are "same, similar or related issues of fact or law” and the claims are suitable to be brought in collective proceedings. In determining this, the CAT will consider all matters it thinks fit, including costs, size and nature of the class. 

US
Class actions in the US are a type of representative claim, in which a lead plaintiff conducts litigation on behalf of a class. In order to do so, the representative must satisfy the court that it is a member of the class and that it has standing to bring the claim. The class representative must also establish that the proposed class is sufficiently defined.

Within the federal system, procedure relating to class actions is governed by Rule 23 of the FRCP. In order to proceed as a class action, the court must certify that the class complies with the following requirements: 

• the class must be so numerous that joining each member would be impractical;
• there must be common questions of law or fact;
• the claim or defences of the representative must be typical of the class; and
• the representative must fairly and adequately protect the interests of the class.

Once the court is satisfied with compliance of the above, the representative plaintiff will also need to demonstrate to the court that at least one of the conditions below is met: 

• there is a risk of inconsistent adjudications if the actions are pursued individually or there is a risk that the class members' ability to protect their interests would be substantially impaired if the actions are pursued individually;
• final injunctive or declarative relief is appropriate as the defendant acted on grounds generally applicable to the entire class; or
• common questions of fact or law predominate over individual issues and a class action is the superior method for fairly and efficiently determining the claims. This is the most important factor in actions pursuing monetary damages.
  
  

Disclosure

England
The English courts are required to limit disclosure to what is strictly necessary to deal with the case justly. Disclosure in England is also not automatic. As such, the court may direct group parties to undertake standard or specific disclosure. An order for standard disclosure will require each party to disclose the documents on which they rely; which adversely affect their own or another party’s case; which support another party’s case; and which they are required to disclose. In this context, a document is broadly defined as “anything in which information of any description is recorded”.

For collective actions brought under the Competition Act 1998, directions on disclosure will be provided at case management conferences unless the CAT otherwise thinks fit. Whilst the CAT will recognise the need to “limit disclosure to that which is necessary to deal with the case justly”, it may order disclosure to be given by any party to the proceedings. Group parties may apply for disclosure in relation to non-parties if required.

US
Within the federal system, traditionally, discovery for class actions is undertaken pre-certification and post-certification, although many courts are now moving away from this. Pre-certification discovery allows the court to examine whether the requirements under Rule 23 of the FRCP in relation to class certification are satisfied. Usually the court will be unable to make a judgment on this unless it has been able to view factual evidence and in certain cases, expert opinions.

Following certification, the FRCP provides that “parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defence”. Alongside this, the parties must consider a range of factors in evaluating the scope of discovery, including proportionality, the resources available and the expense of the proposed discovery. 

Damages

England
Damages awarded in England will vary depending on the nature of the claim. For breach of contract, damages will seek to put the claimant in the position they would have been in had the contract been properly performed. For a claim in tort, the measure of damages will put the injured parties in the position they would have been in had the tortious act not occurred.

For claims brought under the Competition Act 1998, the CAT has the power to make an aggregated award of damages, which may include various directions as to the apportionment of the damages. Awards for punitive (or exemplary) damages in proceedings before the CAT and the court are limited in England.

US
In the US, a wide range of damages may be awarded for classes certified under the FRCP. These awards may include compensatory damages and, where appropriate, punitive damages. The federal court will then apportion damages between class plaintiffs and quantification may be determined by reference to expert opinion. Defendants may be held to be jointly and severally liable for co-defendants. 

Settlement

England
For group actions commenced under the CPR, settlement may be reached at any stage in proceedings. Permission of the court is usually not required, unless the claim is made by, against or on behalf of a child or protected party. Where proceedings have been issued, the parties should notify the court of the settlement. The claim will then be discontinued or stayed pending enforcement of the settlement.

In the CAT, however, it will be necessary to seek permission to settle proceedings for opt-out collective actions. The CAT will make a collective settlement approval order where it is satisfied that the settlement is “just and reasonable”. For opt-in collective proceedings, parties cannot settle without the permission of the court before the expiry of the time specified in the collective proceedings order.

US
Under the FRCP, any settlement, voluntary dismissal or compromise of claims, issues or defences of a certified class requires court approval. Notice should be provided “in a reasonable manner” to all class members who would be bound by the proposal. The court will then conduct a hearing and determine whether the proposal is “fair, reasonable, and adequate”. 

Legal costs and funding

England
As a general rule, the ‘winner’ will recover their litigation costs (including solicitors’ and barristers’ fees and any disbursements) from the other side. Where not agreed between the parties, costs will be assessed by the court (which can exercise a wide discretion). Similarly, the CAT has a wide discretion and will consider a range of factors in determining costs, including conduct of the parties and proportionality.

There are numerous ways to fund litigation in this jurisdiction. After the event (ATE) insurance is available to provide coverage for legal costs and expenses after a dispute has arisen. Conditional fee agreements (CFAs) and damages-based agreements (DBAs) are permitted as contingency fee arrangements.[2] Alongside ATE insurance, CFAs and DBAs, the third party litigation funding market has grown rapidly in England in recent years and is now a widely-established practice in commercial litigation. 

US
In the US, there is no ‘loser pays’ principle. Instead, the general rule is that each party will bear their own fees and costs. There are, of course, exceptions to the rule. For example, there are many federal fee-shifting statutes in place and group parties may also enter into contractual fee-shifting arrangements.

Contingency fee agreements are permitted in the US. As such, class actions are often funded through arrangements of this type between class plaintiffs and counsel. Although generally permitted, third party litigation funding and ATE insurance are emerging practices at present.

Conclusion 

Class actions in the US are a well-entrenched feature of the judicial system. In recent years, however, there has been a significant increase in group actions in England. This is due to the growth in the third party litigation funding market and the flexibility of the procedural regimes available to group claimants in this jurisdiction. Although there are broad similarities, the legal frameworks governing group proceedings in England and the US are often divergent in nature.

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