From out in the wilderness to under the microscope – what in-house counsel need to know about group claims

Drawing from discussions with specialists on both sides of class action litigation, Anna Huntley rounds up the key issues for in-house lawyers to be aware of when navigating group litigation.

‘In-house counsel can’t afford to ignore group claims – they need to become more familiar with them, get skilled up on them and realise that they could end up in a situation where they’re involved – either claimant or defendant.’

As commercial litigator James Oldnall – a founding partner of group claims firm Milberg London – sets out above, it is crucial for in-house lawyers to be up to speed on group litigation. The UK collective actions regime has gone through a transformative period in recent years, marked by a surge in both frequency and complexity of such claims, as such, there is much to consider for proactive corporate counsel looking to ensure they are prepared for all eventualities.

The state of play

The societal significance of these actions has been underscored by events such the Post Office scandal, which saw 555 sub-postmasters come together to bring a claim against their former employer. As Oldnall explains: ‘Group actions used to be a bit of a backwater, but with advances in the Competition Appeal Tribunal (CAT) regime and technology, bigger claims are being brought. Bigger claims mean people throw more resources at them, and more resources mean higher calibre teams are fighting these cases, so they’ve gone from out in the wilderness to under the microscope.’

NGOs and activists are using group litigation as a tool to seek to influence corporate behaviour. For in-house counsel, it is important to be aware of this dynamic.
Maxine Mossman, Clifford Chance

Oldnall cites the Sony v Alex Neill case, in which Milberg is acting on behalf of 8.9 million UK customers, as an example of this transformation. The opt-out claim alleges that Sony exploited its dominant market position to overcharge PlayStation customers. The size of the group of claimants means that it inevitably includes individuals from diverse backgrounds, including those from underprivileged communities as well as more vulnerable individuals with disabilities; underlining the broader societal impact of class actions, in that they offer consumers a real platform to seek justice and potentially influence corporate conduct.

The importance of the CAT has surged since the Consumer Rights Act 2015 extended its jurisdiction, with the Supreme Court’s 2021 decision upholding the CAT’s certification of Merricks v Mastercard opening the floodgates. Notes Clifford Chance (CC) commercial litigation partner Samantha Ward: ‘Once the Consumer Rights Act came into force and permitted opt-out class actions in the Competition Appeal Tribunal, it was fairly clear from the outset that the regime would lead to a surge in class action claims.’

The UK litigation funding market has surged over the last decade to become, in the words of Maxine Mossman, CC’s London private wealth and trusts disputes team co-lead, ‘the world’s second largest, after the US’, with an estimated value in 2022 of ‘some £2.2bn’. Camilla Sanger, a specialist in disputes and group action claims at Slaughter and May, notes that funders are taking more of ‘a portfolio view of claims,’ a shift in strategy which is helping to enhance the viability of investment in litigation.

Mossman also flags another intriguing trend in the market – activists using group litigation as a way to wield influence over corporates and advocate for social or environmental causes. ‘It used to be the case that group litigation claims were about securing compensation payouts. However, increasingly, NGOs and activists are using group litigation as a tool to seek to influence corporate behaviour. For in-house counsel, it is important to be aware of this dynamic.’ Such strategic use of group claims to drive systemic shifts underscores a fundamental change in how societal objectives can be pursued via legal channels, and so for in-house counsel, truly understanding this dynamic is crucial to navigating evolving corporate legal challenges.

Staying ahead of the game

Taking proactive steps to stay ahead of the curve is another essential consideration in today’s rapidly evolving regulatory landscape. As Oldnall notes, businesses must proactively adapt to shifting dynamics to effectively manage potential regulatory risks; given the law is ‘constantly moving and adjusting.’ He continues: ‘It was quite easy for a business to sleepwalk into a circumstance where, while they were previously compliant, now they’re no longer because the regulations have changed or business practices have changed.’

To keep pace, Hogan Lovells disputes partner Matthew Felwick, who co-chairs the firm’s London life sciences team, suggests looking to other jurisdictions to track industry trends and anticipate potential claims. By monitoring potential claims in regions with claimant-friendly regimes, businesses can pick up early warnings and stay ahead of emerging regulatory changes. ‘We see a lot of collaboration and communication between claimant firms in different jurisdictions,’ he notes. ‘Therefore, another task for in-house lawyers could be to monitor their industry and the potential claims being brought against it in places like the US and other jurisdictions, such as the Netherlands, where there’s a particularly claimant-friendly regime. By seeing which other companies are being targeted there, they can receive an early warning that they could become a focus in the UK.’

Andrew Hill, who heads up the securities litigation team at Fox Williams, highlights the critical importance of integrating environmental, social, and governance (ESG) frameworks as proactive measures amidst regulatory scrutiny. Echoing Mossman’s observations on group litigation’s influence on corporate behaviour, Hill stresses that securities litigation enables investors to ensure companies uphold their commitments to the market, particularly in governance matters. ‘At a basic level, all securities litigation cases are ESG cases because they’re all about governance and a breakdown in governance,’ he notes.

Emphasising the urgency for companies to prioritise internal review and compliance efforts, particularly in areas such as environmental claims, Stephenson Harwood commercial disputes partner Genevieve Quierin says: ‘Corporates just need to be a hell of a lot more careful and really ensure they have all the right policies and procedures in place.’ Additionally, she highlights the imperative of remaining alive to accusations of greenwashing – ‘a very big area at the moment.’

Anticipating the next move

Anticipating the origins of claims and developing effective response strategies is crucial. As Oldnall describes, the path of group actions can be deceptive, marked by periods of apparent inactivity, followed by sudden momentum – or ‘slow slow slow, fast fast fast,’ as he colourfully characterises it. This emphasises the need for constant vigilance, even during quieter times. Similarly, Ward highlights the inevitability of follow-on litigation: ‘as night follows day, you’re going to face follow-on litigation,’ highlighting the imperative for businesses to anticipate claim origins and prepare response strategies.

At a basic level, all securities litigation cases are ESG cases because they’re all about governance and a breakdown in governance.
Andrew Hill, Fox Williams

Felwick advises engagement with litigators during compliance efforts, urging companies to consider potential litigation from the outset. He stresses the importance of examining various aspects such as document management and regulatory communications to identify and address potential legal issues proactively. Felwick also cautions against overlooking early warning signs, urging a broad approach to risk assessment and strategy development: ‘just because you have one disgruntled customer, you need to think broadly about the complaints that are being raised and consider what would happen if they were put on a forum and gained momentum.’

Expanding this notion, Ward places a spotlight on the consumer as the ‘beating heart’ of many class action claims, stressing the need for businesses to prioritise fairness in their dealings with consumers. He urges: ‘Businesses need to think broadly and creatively about consumer fairness issues and how they treat the consumer.’ Sanger supports this notion, arguing that: ‘Companies need to be increasingly aware that claimants are using the collective proceedings mechanism because it’s very effective in providing a means of redress on a large scale. Because the bar for certification is low, these claims are being brought in very creative ways to try and pursue claims that are a long way from a traditional view of competition litigation.’ This evolving consumer-led landscape necessitates a broader understanding of potential legal risks beyond traditional competition law matters to areas such as consumer fairness issues, unfair trading terms, and pricing practices.

Fail to prepare, prepare to fail

Martyn Day, joint founder of Leigh Day and an expert in international, environmental, and product liability claims, underscores the vital need for immediate and proactive measures when facing potential claims. He cautions against complacency: ‘You can’t just fob it off – it is just going to get worse and worse – like a bad toothache.’ Day further advises seeking unbiased perspectives, warning against relying solely on individuals with vested interests asserting: ‘Don’t just go and ask people whose job depends on saying what you want them to hear – go to people who are actually going to be objective.’ This underscores the critical importance of early intervention and resolution to prevent issues from escalating into costly legal battles down the line.

Moreover, fostering a robust relationship between external and internal in-house counsel emerges as a key strategy. Day highlights the significance of having accessible in-house counsel who can respond swiftly and be available at all times. ‘Having an in-house counsel who can respond speedily, and be in the position where they can be contacted anytime is a massive benefit to the external lawyers representing them.’

This sentiment finds resonance in Sanger’s perspective, who underscores the importance of well-defined processes and response strategies. For instance, she notes the growing utilisation of the media by claimant law firms. ‘They are becoming more media-savvy in terms of how they advertise claims, how they communicate with people about the claims: they’re all over Instagram, increasingly using podcasts, the press, and publicising what they’re doing and what they’re trying to pursue in bringing these claims.’ As such, companies on the defendant side need to effectively counter such strategies, ideally with a similarly competent and creative communications team that is alive to evolving trends in media engagement, working under a coordinated engagement plan, both internally and externally.

Taking the plunge

When contemplating initiating or joining claims against larger entities alongside other businesses, there is usually a degree of uncertainty among individuals. Oldnall, drawing from his experience, notes hesitations among participants, acknowledging that it can feel ‘overwhelming’ and sometimes ‘seemingly too good to be true.’

He recognises that such hesitation often stems from scare stories around litigation involving big corporates; but he also presents the counterpoint of the strength in numbers offered by group claims, emphasising that claimants can find safety and support within the collective. Echoing this sentiment, Day emphasises the necessity of not facing such endeavours alone, suggesting seeking funding as a strategic move for enhancing success and safeguarding interests: ‘Even the best cause in the world can go sour,’ he says. ‘If I was a small business, I would definitely be looking for funding to hedge my bets.’

The Post Office case has brought to fruition that companies can do horrible things, and without compassion and funding, they would never have seen the light of day.
James Oldnall, Milberg London

Kate Pollock, head of competition litigation at Stewarts, points to the need for ‘a high degree of care in any initial approaches when evaluating the potential for a claim,’ highlighting the importance of early caution, and the necessity of precise discussions to prevent inadvertent entanglement in anti-competitive practices while exploring grievances. She adds that early involvement of external counsel is crucial to maintain confidentiality and navigate legal complexities efficiently.

Day backs up this point, emphasising the critical significance of selecting specialised law firms with a proven track record in the relevant field and a history of success, cautioning against ‘just going to your own lawyers that do other things for the firm.’ Hill furthers this sentiment of caution, advising potential claimants to thoroughly assess their options before deciding which group to join: ‘Be aware that there may be other law firms looking at these potential cases. Really test the market before making a decision about which group to join.’

The rise of group actions is undeniable, and Oldnall highlights the role that the Post Office scandal has played in futhering this: ‘This market was viewed with a degree of disdain, but the Post Office case has brought to fruition that companies can do horrible things, and without compassion and funding, they would never have seen the light of day.’ As these claims garner increased attention, it’s imperative for in-house counsel to remain vigilant, proactive, and engaged in staying updated, anticipating claims, and developing robust response strategies in today’s dynamic legal environment.