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The McLaren case – A Step Forward, or a Step Backward for the UK Class Action?

The following article was contributed by Mikolaj Burzec, a litigation finance advisor and broker. He is also a content writer for Sentry Funding.

The Competition Appeal Tribunal, London’s specialist competition court, has confirmed that a special purpose company led by Mark McLaren, formerly of The Consumers’ Association, will act as the Class Representation. McLaren represents millions of motorists and businesses who bought or leased a new car between October 2006 and September 2015 against five shipping companies that imported cars into Europe.

The European Commission has already found that the car carriers fixed prices, manipulated bids, and divided the market for roll-on roll-off transport by sea. According to the Commission, the carriers had agreed to maintain the status quo in the market and to respect each other’s ongoing business on certain routes, or with certain customers by offering artificially high prices or not bidding at all in tenders for vehicle manufacturers.

The class action follows the EC decision. It is one of the first actions of its kind in the UK and damages for car buyers are estimated at around £150 million.

The class representative

Mark McLaren has set up a non-for-profit company – Mark McLaren Class Representative Limited – specifically to bring this claim. Mark is the sole director and only member of the company and therefore has full control over it.

In a collective action, the class representative is responsible for conducting the action on behalf of the class. His duties include:

  • instructing specialist lawyers and experts
  • deciding whether to proceed with the claim and, in particular, deciding whether to refer an offer of settlement to the Competition Appeal Tribunal for approval
  • communicating with the class and issuing formal notices to class members by various means, including posting notices on this website.

An independent advisory committee will be appointed to assist in the decision-making process.

The claim

From 2006 to 2012, five major shipping companies were involved in a cartel that affected prices for the sea transport of new motor vehicles, including cars and vans. During the period of the cartel, the shipping companies exchanged confidential information, manipulated tenders and prices, and reduced overall capacity in the market for the carriage of cars and vans.

The cartel resulted in car manufacturers paying too much to transport new vehicles from their factories around the world to the UK and Europe. Customers who bought a new car or van between 18 October 2006 and 6 September 2015 probably also paid too much for the delivery.

This is because when a manufacturer sets the price of its new cars or vans, it takes into account the total cost of delivery, including shipping costs. For simplicity, car manufacturers usually divide their total delivery costs equally among all the cars and/or vans they sell. When a customer buys a new car or van, he pays for “delivery”, either separately or as part of the on-road price.

Although the car manufacturers themselves have done nothing wrong, customers who bought a new car or van between 18 October 2006 and 6 September 2015 are likely to have paid an increased delivery charge.

The European Commission has already decided to impose fines of several hundred million euros on the shipping companies. The lawsuit seeks to recover these extra costs from the shipping companies who were involved in the cartel.

The Competition Appeal Tribunal’s decision

The Tribunal has authorised the claims to proceed as a class action. This means that millions of motorists and businesses could be entitled to compensation and these individuals and companies will now automatically be represented in court unless they choose to leave (opt-out) the claim.

McLaren is the first Collective Proceeding Order judgment in which the Tribunal has explicitly considered the position of larger corporates within an opt-out class with the defendants having argued that big businesses should be removed and treated on an opt-in basis. The Tribunal’s refusal to treat larger businesses in the class differently to smaller corporates and consumers is noteworthy, and these aspects of the judgment will no doubt be of interest for the future proposed collective actions which feature businesses.

McLaren further explored the appropriate legal test applied to the methodology in order to establish a class-wide loss at the certification stage.

The Tribunal denied the defendants’ strike out request, which was based on purported inadequacies in the claimant’s methodology. The Tribunal concluded that its job at the certification stage is not to analyse the expert methodology’s merits and robustness; rather, the Tribunal will determine whether the methodology provides a “realistic chance of evaluating loss on a class-wide basis.” It further stressed that this does not imply that the Tribunal must be convinced that the approach will work, or that the methodology must be proven to work.

The Tribunal emphasized the critical role of third-party funding in collective actions, as well as confirmed that the potential take-up rate by the class is not the only measure of benefit derived from the proceedings, with another benefit being the role of collective claims in deterring wrongful conduct. Despite the fact that the sums involved per class member may be little, the Tribunal focused on the fact that the total claim value is significant and that the majority of class members would be able to retrieve information about vehicle purchases.

In the end, the Tribunal managed two issues that have been discussed in earlier decisions: inclusion of deceased consumers in the class and compound interest. Corresponding to the previous, McLaren was not allowed to change his case to incorporate potential class individuals who had died before procedures being given, because of the expiry of the limitation period. Regarding the latter, in contrast to the judgment in Merricks last year, the Tribunal was ready to certify compound interest as a standard issue even though it is common just to a part of the class who had bought vehicles using finance agreements.

The Tribunal’s decision is conditional upon McLaren making adjustments to his methodology to account for the ruling on these points, and any determination as to the need for sub-classes.

Case name and number: 1339/7/7/20 Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and Others

The whole judgment is available here: https://www.catribunal.org.uk/judgments/13397720-mark-mclaren-class-representative-limited-v-mol-europe-africa-ltd-and-others

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Announcements Commercial Regulatory Issues

More Than 100 Companies Sign Letter Urging Third-Party Litigation Funding Disclosure Rule for Federal Courts Ahead of October Judicial Rules Meeting

By Harry Moran |

In the most significant demonstration of concern for secretive third-party litigation funding (TPLF) to date, 124 companies, including industry leaders in healthcare, technology, financial services, insurance, energy, transportation, automotive and other sectors today sent a letter to the Advisory Committee on Civil Rules urging creation of a new rule that would require a uniform process for the disclosure of TPLF in federal cases nationwide. The Advisory Committee on Civil Rules will meet on October 10 and plans to discuss whether to move ahead with the development of a new rule addressing TPLF.

The letter, organized by Lawyers for Civil Justice (LCJ), comes at a time when TPLF has grown into a 15 billion dollar industry and invests funding in an increasing number of cases which, in turn, has triggered a growing number of requests from litigants asking courts to order the disclosure of funding agreements in their cases. The letter contends that courts are responding to these requests with a “variety of approaches and inconsistent practices [that] is creating a fragmented and incoherent procedural landscape in the federal courts.” It states that a rule is “particularly needed to supersede the misplaced reliance on ex parte conversations; ex parte communications are strongly disfavored by the Code of Conduct for U.S. Judges because they are both ineffective in educating courts and highly unfair to the parties who are excluded.”

Reflecting the growing concern with undisclosed TPLF and its impact on the justice system, LCJ and the Institute for Legal Reform (ILR) submitted a separate detailed comment letter to the Advisory Committee that also advocates for a “simple and predictable rule for TPLF disclosure.”

Alex Dahl, LCJ’s General Counsel said: “The Advisory Committee should propose a straightforward, uniform rule for TPLF disclosure. Absent such a rule, the continued uncertainty and court-endorsed secrecy of non-party funding will further unfairly skew federal civil litigation. The support from 124 companies reflects both the importance of a uniform disclosure rule and the urgent need for action.”

The corporate letter advances a number of additional reasons why TPLF disclosure is needed in federal courts:

Control: The letter argues that parties “cannot make informed decisions without knowing the stakeholders who control the litigation… and cannot understand the control features of a TPLF agreement without reading the agreement.” While many funding agreements state that the funder does not control the litigation strategy, companies are increasingly concerned that they use their growing financial leverage to exercise improper influence.

Procedural safeguards: The companies maintain that the safeguards embodied in the Federal Rules of Civil Procedure (FRCP) cannot work without disclosure of TPLF.  One example is that courts and parties today are largely unaware of and unable to address conflicts between witnesses, the court, and parties on the one hand, and non-parties on the other, when these funding agreements and the financial interests behind them remain largely secret.

Appraisal of the case: Finally, the letter reasons that the FRCP already require the disclosure of corporate insurance policies which the Advisory Committee explained in 1970 “will enable counsel for both sides to make the same realistic appraisal of the case, so that settlement and litigation strategy are based on knowledge and not speculation.” The companies maintain that this very same logic should also require the disclosure of TPLF given its growing role and impact on federal civil litigation.

Besides the corporate letter and joint comment, LCJ is intensifying its efforts to rally companies and practitioners to Ask About TPLF in their cases, and to press for a uniform federal rule to require disclosure. LCJ will be launching a new Ask About TPLF website that will serve as a hub for its new campaign later this month.

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Commercial People Moves

Mesh Capital Hires Augusto Delarco to Bolster Litigation Finance Practice

By Harry Moran |

In a post on LinkedIn, Mesh Capital announced the hiring of Augusto Delarco who has joined the Brazilian firm as a Senior Associate, bringing a “solid and distinguished track record in complex litigation and innovative financial solutions” to help develop Mesh Capital’s Litigation Finance and Special Situations practices. 

The announcement highlighted the experience Delarco would bring to the team, noting that throughout his career “he has advised clients, investors, and asset managers on strategic cases and the structuring of investments involving judicial assets.”

Delarco joins Mesh Capital from Padis Mattars Lawyers where he served as an associate lawyer, having previously spent six years at Tepedino, Migliore, Berezowski and Poppa Laywers.

Mesh Capital is based out of São Paulo and specialises in special situations, legal claims and distressed assets. Within litigation finance, Mesh Capital focuses on “the acquisition, sale and structuring of legal claims, covering private, public and court-ordered credit rights.”

Case Developments Commercial

Delaware Court Denies Target’s Discovery Request for Funding Documents in Copyright Infringement Case

By Harry Moran |

A recent court opinion in a copyright infringement cases has once again demonstrated that judges are hesitant to force plaintiffs and their funders to hand over information that is not relevant to the claim at hand, as the judge denied the defendant’s discovery request for documents sent by the plaintiff to its litigation funder.

In an article on E-Discovery LLC, Michael Berman analyses a ruling handed down by Judge Stephanos Bibas in the United States District Court for the District of Delaware, in the case of Design With Friends, Inc. v. Target Corporation. Design has brought a claim of copyright infringement and breach of contract, and received funding to pursue the case from Validity Finance. As part of its defense, Target had sought documents from the funder relating to its involvement in the case, but Judge Bibas ruled that Target’s request was both “too burdensome to disclose” and was seeking “information that is attorney work product”.

Target’s broad subpoena contained five requests for information including Validity’s valuations of the lawsuit, communications between the funder and plaintiff prior to the funding agreement being signed, and information about the relationship between the two parties.

With regards to the valuations, Judge Bibas wrote that “while those documents informed an investment decision, they did so by evaluating whether a lawsuit had merit and what damages it might recover,” which in the court’s opinion constitutes “legal analysis done for a legal purpose”. He went on to say that “if the work-product doctrine did not protect these records,” then the forced disclosure of these documents “would chill lawyers from discussing a pending case frankly.”

Regarding the requests for information about the relationship between Design and Validity, Judge Bibas was clear in his opinion that these requests were disproportionately burdensome. The opinion lays out clear the clear reasoning that “Target already knows that Validity is funding the suit and that it does not need to approve a settlement”, and with this information already available “Further minutiae about Validity are hardly relevant to whether Target infringed a copyright or breached a contract years before Validity entered the picture.”The full opinion from Judge Bibas can be read here.