Marks & Clerk fails in bid to throw out group 'opt out' claim relating to alleged secret commissions

IP firm alleged to have received secret payments from services provider CPA Global for referring clients

IP firm Marks & Clerk has failed in its to bid to dismiss a claim that alleges it received secret commissions for referring clients to IP services provider CPA Global (now Clarivate).

The firm had also argued that the plaintiff - Commission Recovery Limited (CRL) - could not act on behalf of others, but on 23 February at the England and Wales High Court Mr Justice Robin Knowles said the case should go ahead and found that CRL had successfully met the hurdle for representative claimants set out in the Supreme Court judgment in Lloyd v. Google in November 2021.

CRL was formed by IP solicitor Peter Rouse to act on behalf of a number of clients of Marks & Clerk. In the case Commission Recovery Limited v. Marks & Clerk LLP and Long Acre Renewals, Marks & Clerk was represented by John Machell KC and Russell Hopkins (instructed by Clifford Chance); the claimants were represented by Nico Leslie (instructed by Signature Litigation).

Knowles ruled, after consideration of the parties’ submissions and underlying law, that he would “allow the claimant to represent the class, and to do so on the ‘opt out’ basis proposed”. The case will go ahead allowing any clients to opt out of the case if they wish.

The judge noted that it is common for the holders of registered IP rights to have to pay renewal fees in the jurisdictions in which the rights are registered. The defendant Marks & Clerk does not provide any renewal services but it is alleged that it passed information about clients to CPA Global, which paid commission fees for any renewals to a firm called Long Acre Renewals; a partnership set up by current and former partners of Marks & Clerk.

It is alleged that Marks & Clerk hid these commissions from its clients, breaching its fiduciary duty to its clients to act in their best interests. The judge noted: ‘The defendants suggest that in some cases information may have been provided informally, but there is at present little evidence and one example to support this position."

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In bringing the claim, CRL pleaded the case based on that of another now dissolved company and former Marks & Clerk client Bambach Europe, arguing that its case was representative of other companies that had been impacted by Marks & Clerk’s alleged actions under CPR 19.6. 

CPR 19.6 allows a representative action to be brought by, or against, one or more persons as representatives of any others who have the same interest in the claim, without the need to identify the represented parties.

Marks & Clerk and Long Acre Renewals sought to argue that the potential claimants did not have the “same interest” under the test established in Lloyd v. Google and that the meaning of “client” is unclear in the context of the case. 

In analysing the defendant’s arguments around “same interest”, Mr Justice Knowles stated: "What matters is whether the ‘same interest’ requirement is met, and in particular whether the points involve class members affected by an issue prejudicing the position of others. None do.”  Knowles concluded: “There is no absence of same interest.”

Knowles said in his judgment clients could opt out of the claim if they wish. He said he would consider "at the defendants' request, authorising a suitable form of communication from the court (sent by the defendants' solicitors as the court's officers) to all material clients advising them expressly that they may ‘opt out’'.

Marks & Clerk also argued that the assignment from Bambach Europe to the claimant was an unlawful champertous assignment of a bare right to litigate. The judge, however believed: ‘In these circumstances I am not prepared to strike out the claim as one based on an unlawful champertous assignment of a bare right to litigate.’

Responding to the judgment, a Marks & Clerks spokesperson said: "The allegations in the claims mischaracterise the work Marks & Clerk undertakes and its relationship with CPA, and we strongly deny any wrongdoing. Marks & Clerk will be seeking leave to appeal to the Court of Appeal and intends to pursue its appeal vigorously.”

A spokesperson for Clarivate said: “Clarivate, who acquired CPA Global in 2020, categorically and emphatically denies any wrongdoing in our business. Neither Clarivate nor CPA Global are named as defendants in the legal action.”

In a finding of interest to litigation funders, Knowles ruled that claims under CPR 19.6 could see mechanisms put in place “to allow reasonable costs of the recovery achieved to be paid before disbursement to the members of the class”.

It is estimated that the commissions involved may total some tens of millions of pounds.

Signature Litigation's Daniel Spendlove, lead partner for CRL, said: “This judgment is significant for the legal industry, providing greater clarity on the limits of England and Wales’ representative action regime.”

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