UK Class Action Certificate | Hogan Lovells | Daily News Byte

Competition class actions

The statutory regime for competing class actions requires a collective action order (CPO) to be made before a claim can proceed. This is equivalent to a class certificate in other regimes. To create a CPO, the proposed class representative must be “authorized” and the claims must be “eligible” for inclusion in the class action. The Competition Appellate Tribunal, which hears such claims, must also decide whether the claim should proceed as an opt-out or opt-in class.

To authorize a class representative it must be fair and reasonable for the individual to act as representative. In practice this has caused little difficulty in cases to date and representatives have included consumer organisations, special purpose vehicles and individuals. The only questions raised as to whether the proposed representative should be authorized are whether the representative’s funding arrangements are adequate. The Tribunal has taken a very pragmatic approach to these issues, allowing changes to funding arrangements to address any issues. It is clearly considered that efficient funding mechanisms are essential for the regime to succeed and indeed the fact that London has a thriving litigation funding market is key to the rapid growth of class actions.

Almost all certification battles thus far have been fought about “eligibility.” Claims are eligible for inclusion in a class action if they are brought on behalf of an identifiable class, raise the same, similar, or related issues of fact or law and are appropriate for bringing in a class action. The Supreme Court made clear in Merricks that it views this as a low threshold. This is primarily a result of two very important aspects of the rule and their interpretation by the Supreme Court.

1. The regime provides for awards of aggregate damages, meaning that damages can be awarded without regard to the damages suffered by individual class members. The Supreme Court has interpreted this not only as a means of facilitating authentication, but also as applying to proving causation and establishing liability on a classwide basis. The result is that many potential objections to certification based on the individual circumstances of class members are eliminated. Additionally, the Supreme Court has adopted a relatively low standard for establishing common issues on a class-wide basis (derived from Canadian case law) requiring only that there be a real and plausible mechanism based on the facts. This leads to the acceptance for certification purposes of top down methods of assessing overall damages proposed by experts – even if they are not optimal if accepted by the courts.
2. Second, the Supreme Court found that whether a claim qualifies for inclusion is a matter of relative merit, not an absolute threshold. In other words, the question is, is it relatively more appropriate for a claim brought as part of a class action than for an individual claim? The result of this is that the difficulties a claim would face if brought as an individual claim are not seen as a valid objection to bringing it as a class action.

The Supreme Court also held that the test for certification of an opt-out class does not involve an assessment of the merits of the claim. The Tribunal will not conduct a mini-trial of the issues while hearing the CPO application. The lack of a merits test has meant that it has become common for defendants to bring an application to strike out a claim similar to a CPO application so that issues on the merits can be heard. No such application has been successful till date.

However, it should not be thought that potential class actions will not be investigated. This is illustrated by a recent ruling regarding two competing applications for certification of opt-out class actions related to the FX market.². The ruling found that both claims were in danger of being struck out because they did not adequately plead causation and refused to certify either of them as an opt-out class because they were not strong enough claims. Class representatives were instead given the option to amend the claims as opt-out class actions. Indeed the only other occasion since Merricks on which a CPO application failed was when the tribunal favored a rival opt-in class action on opt-out.

The FX case was also important because it addressed the carriage dispute for the first time. The tribunal refused to decide the vehicle dispute before the certification hearing, forcing both class representatives to bear the costs of preparing the claim and applying for certification. This approach would impose significant cost risk on class representatives and their funders when carriage disputes arise, and would be a concern for claimant attorneys.

in the future

The approach to certification outlined in Merricks is clearly helpful to litigants. But the ruling in the FX case shows that class actions have scrutiny at the certification stage. In any event, the lower threshold applied in Merix could store problems for the future. In adopting a relatively low bar, there are issues fundamental to the viability of the claim which the tribunal is expressly leaving to address at trial. Moreover, the Tribunal has more than once referred to its power to revisit the certification at a later stage as the case develops.

Therefore, it appears that the price that claimants may have to pay for a lower certification threshold is that certification is no guarantee of potential future success. This will clearly affect the dynamics of such cases going forward in terms of issues like settlement.