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

By Tony Webster |
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

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

Burford Capital Explores Worldwide Antitrust Competition 

Europe and the United Kingdom continue to pummel United States technology giants with billion-dollar claims to kill marketplace manipulation related to anti-competitive behavior. This begs the question of if regulators in California and New York will embrace the idea of cross-border regulation. These perspectives are actively being considered by the world’s foremost decision makers in the field of regulatory innovation.  Burford Capital’s Q1-2022 quarterly explores the notion of antitrust litigation in the sphere of global economies. Burford alludes to the concept of global antitrust competition, which is a notion that touches upon a variety of issues that face individuals across the world. It is forecasted that simultaneous actions across jurisdictions may be the way forward, especially with recent sanctions against Russian enterprise as a result of the Ukraine invasion.  The White House is expected to issue various executive orders that aim to tackle the thorny issue of regulatory innovation, at the cross-border level. We have made 30 highlights to Burford Capital’s Q1-2022 quarterly for your general reference.  

The History of Litigation Finance in Canada 

In 2015, Omni Bridgeway opened the first litigation finance office in Canada’s history. Omni’s overarching goal was to offer access to Canada’s justice system. Since then, demand for investment in the Canadian litigation finance industry has continued to grow exponentially. Sophisticated, bespoke solutions are being developed in Canada to support marketplace innovation.  Omni Bridgeway’s new insights into the Canadian ligation finance industry suggest that ‘funding is not a monolith.’ All metrics point to the market supporting a cornucopia of different products and services to fit a variety of client needs in the space. Canada’s litigation finance space was born by funding large meritorious cases that afforded access to the risky enterprise of litigation. Litigation finance investment now serves as a risk mitigation tool in Canada. A basket of litigation claims can serve as a cross-collateralization facility. Anchoring a portfolio of cases can produce multiple returns for future firm and investor success stories.  AmLaw 100 firms are starting to embrace pooling portfolios for even grander return expectations over the long term. Similarly, the evolution of Canada's litigation finance space is begging the question of what other financial products are needed to meet opportunities for revenue generation. 

Litigation Finance Turns Justice into a Financial Asset

We’re all familiar with the phrase ‘equal justice under the law.’ Yet some would say the accuracy of that statement is debatable. Meanwhile, litigation funding, a practice developed specifically to increase access to justice, is sometimes painted as a way of exploiting lawsuits for financial gain. The Hill details that so-called ‘patent trolls’ develop IP or patent lawsuits with no intention of taking them to court. This could leave a damaging impact on small businesses that must spend limited resources fighting the accusation. The Litigation Finance industry has been accused of increasing its investment in so-called patent trolls—especially since patent lawsuits have become a popular case type for funders and investors. Those who oppose funded patent cases make much of Litigation Finance investors being hedge funds and private equity firms. Steps to curb third-party legal funding for patent cases have been introduced. The Pride in Patent Ownership Act would require disclosure of the identities of patent owners. The thinking is that this transparency would discourage funders from bankrolling patent cases. The bill is supported by Democrat Patrick Leahy and Republican Thom Tillis. Also under fire is the NHK-Fintiv rule, which states that a Patent Trial and Appeal Board review is denied if a case is already underway. This would send a message that the validity of the patent is uncertain—otherwise, PTAB could have made a ruling on the merits of the case. Those who oppose funding patent litigation claim that the current system “punishes” innovators by forcing them to prove that their innovations aren’t based on, or utilize existing patents. Some even assert that third-party legal funders are “twisting” existing patent law—generating a profit for investors by taking it from business owners and product developers. The word “extortion” has even been used to describe funder involvement in patent cases.

Calls to Regulate Consumer Legal Funding

A recent opinion piece on Consumer Legal Funding pulls no punches in its condemnation of the industry. Its author, Kirsten John Foy, refers to being a “victim” of “predatory practices” of third-party funders. Foy utilized the services of a third-party funder after a violent police assault led to his hospitalization. To cover his living expenses as he awaited legal adjudication, Foy received a cash advance against his expected settlement. Lohud explains that after a settlement was reached, Foy’s financial obligations to the funder left him with what he describes as a “small fraction” of a six-figure settlement. The majority of the settlement was owed to legal funder LawCash. It’s unclear what interest rate or funding terms Foy agreed to, yet what is clear is that despite having a voluntary agreement with LawCash, Foy felt victimized and misled—claiming that LawCash had capitalized on his misfortune. As we know, the Consumer Legal Funding industry is experiencing tremendous growth. Non-recourse funding has been in the US for decades and has grown into a multi-billion dollar industry. Foy suggests that laws capping interest rates and mandating disclosure would reduce the victimization of those who accept funding—as well as expose conflicts of interest. Foy paints the funding industry as taking advantage of its clients: first responders, the wrongfully convicted, injured athletes, victims of corporate negligence, and other survivors of police brutality. Foy regards his story as a cautionary tale and hopes it will encourage lawmakers to enact further regulation, including interest caps. Time will tell how many legislators agree.

When Clients Go Bankrupt, Who Pays? 

This week in the United Kingdom, a case is being heard involving the ligation powerhouse Cadney, regarding their former client Peak Hotels & Resorts Limited. The case involves Peak’s insolvency and inability to pay £4.7M in fees and outstanding costs. The UK Supreme Court justice presiding over the case stands to grapple with the thematic undertones of litigation finance, and whether a lien should be considered litigation funding or not.  LawGazette.co.uk asks the question if attorneys should be penalized for protecting themselves when a client is unwilling to issue due payments. It appears that the case may hinge on whether Cadney’s “deed” or “lien” against Peak is structured as a litigation finance agreement.  Cadney foreshadows an unsuccessful ruling in the case would result in chilling industry effects. However, Peak seems to be arguing the structure of the deed harbors rights and rules associated with a losing litigation finance agreement, henceforth Peak is not liable for fees.  The case is ongoing; and we will continue to provide updates as they arise.

When Divorce Litigation Finance Turns Ugly 

Protecting access to justice is a hallmark of the litigation finance industry. Divorce is no exception. Success stories rain in regarding instances where one party is being ‘jerked around’ with no access to capital. Litigation funders pride themselves on enabling access to justice, but what happens when a funder does its part and the couple decide to push the funder out of its just reward?  Hunters Law examines an instance of divorce with a near £1M award, structured to bamboozle a litigation funder out of its return. The contentious debate of whether the funder was defrauded is not the question, according to author Polly Atkins’ review of the situation. Offering several citations, Ms. Atkins points out the precarious loophole that many divorce litigation agreements embody, one being that the funder is a third wheel that can be cut off if clever clients orchestrate such an occurrence during divorce proceedings.  Ms. Atkins goes on to outline that the funder in question has various avenues to clawback their reward in this particular proceeding. Check out the entire post to learn Ms. Atkins’ full take on the issue.

Allen Fagin is Bullish on Litigation Finance

Allen Fagin is a former partner of Proskauer Rose LLP, where he served as the firm’s chairman from 2005 to 2011. Today, Mr. Fagin is a senior advisor and board member of Validity Finance LLC. Recently, Mr. Fagin penned an op-ed for Reuters Westlaw on the innovative aspects of litigation finance that are contributing to the United States’ legal system.  Writing in Westlaw Today, Mr. Fagin reports that litigation finance is now widely embraced by large firms, with 76% of in-house attorneys reporting usage of ligation finance tools. Mr. Fagin goes on to assert that legal finance will continue to grow in popularity over the next decade. Fagin forecasts that many law firm leaders will continue to explore the benefits of litigation finance to meet and even exceed client expectations, while expanding the firm’s bottom line.  Fagin points to new research findings of the 2021 Law Firm Business Leaders Report, published jointly by Georgetown Law and the Thomson Reuters Institute … highlighting that 80% of law firm leaders are empowered to drive innovation in their office. While this seems exciting, the same study points out that 47% of respondents felt that firm partners were a barrier to such innovation.  Check out Fagin’s complete op-ed to learn more.