CMS clashes with claimant lawyers and funders over 'remarkable rise' in European class actions
Global firm draws fire with assertion proactive building of claims is fuelling group actions
Claimant law firms and litigation funders have hit back at claims by CMS that they are helping to fuel a ‘remarkable’ rise in the number of European class actions.
While CMS says the findings of its European Class Actions Report 2021 should be a “major concern to even the largest companies”, lawyers representing claimants and the institutions that provide financial backing to these cases say they are in the public interest.
The CMS study found that class actions in the EU and the UK grew by 120% from 2018-2020, the number of technology cases having increased 15-fold over the last four years. It blames the rise on the introduction of US-style opt-out procedures in the UK and the Netherlands, the increase in the availability of litigation funding, and the accompanying rise in the number of specialist claimant law firms, including US practices like Hausfeld, which have moved into Europe.
“The expansion of claimant law firms and litigation funders service the demand for claims,” said CMS UK head of disputes Guy Pendell, “but they also create demand in and of themselves through proactively building claims of their own volition.”
The report found that since opt-out class actions were introduced for competition cases in the UK, the average number of annual claims has almost doubled to 15 in 2019 and 2020 from 7.5 in the regime’s first three years. The Netherlands, meanwhile, saw 15 claims lodged in 2020, following the introduction of similar legislation.
CMS London-based litigation partner Kenny Henderson said the findings would be of “major concern to even the largest companies” adding that the report showed that class action risk was becoming mainstream due to a “remarkable” rise in cases.
However, Hausfeld partner Anna Morfey, who specialises in competition claims, said the adoption of class action regimes was "good news" for consumers. "It cannot be right that profits achieved by those who infringe competition law are retained by the companies breaking the law," she said. "It's a common myth, perpetuated by defendants and the firms representing them, that the only ones to benefit from opt-out claims are funders and claimant lawyers.
"As we have already seen in the UK, the courts are very interested in how, and how much of, the damages recovered will go to the victims – and claims brought without a convincing plan to achieve this are unlikely to fare well.”
Leslie Perrin, chair of the International Legal Finance Association, added: "The assertion by CMS to their clients that class action risk is, increasingly, a board-level issue must be a good thing for business and society as it ensures greater accountability and adherence to the rule of law."
He said the main driver for the rise in class actions were government or judicial changes to the law "to provide greater fairness to those affected by anti-competitive behaviour”.
Steve Shinn, CEO of Disputed.io, which brings together funders, law firms and clients on high volume claims, agreed that further waves of group actions were on the horizon, requiring law firms to be technologically prepared to deal with class action claims with thousands of claimants.
Progress on UK group actions, Shinn said, had "helped to differentiate the market and assisted London in maintaining its role as a leading litigation hub". However, competitive pressures rising from Germany and the Netherlands meant that "UK firms must embrace technology now to keep ahead of those jurisdictions biting at their ankles and keen to take on the litigation crown," he said.