The UK has so far proved hostile territory for multi-party actions. Jon Robins reports on changes in the group action field and the firms working to buck the trend


There are some expressions that do not have an easy transatlantic equivalent and ‘class action lawyer’ is probably one. The term suggests sharp-suited US lawyers who have made their millions suing big tobacco or dodgy drugs companies and all manner of corporate wrongdoers on behalf of the little man in return for a decent slice of the winnings. In the UK, in the greater public consciousness, the idea of a ‘British’ class action lawyer barely exists, if it exists at all.



Martyn Day, senior partner of London claimant firm Leigh Day & Co, tells an illustrative tale of the chasm between the fortunes of UK and US class action lawyers. Before Mr Day embarked upon his own ill-fated attempt at suing tobacco companies on behalf of UK smokers, he flew to Boston for a lawyers’ convention. The solicitor arrived on the red-eye flight on Virgin economy to be greeted by the sight of a line of private jets that, according to Mr Day, ’belonged to my brethren trial lawyers’. He was, as he puts it, their ‘poor country cousin’.



The UK smoking litigation, like many subsequent multi-party actions, ran out of puff without even making it into the courtroom. Leigh Day and national firm Irwin Mitchell withdrew from that action eight years ago. As is the case with most group actions, the litigation was dogged by huge funding problems; for the first and last time, the lawyers pursued tobacco companies without insurance. The action collapsed because the clients were left financially exposed, facing the prospect of losing their homes by a funding scheme that Mr Day memorably described as ‘no win, no fee and possible bankruptcy’. The two firms also agreed to hold their legal fire for ten years.



The fortunes of UK group action lawyers had been going steadily downhill before that, ever since the notorious benzodiazepine tranquilliser cases which consumed £30 million of taxpayers’ money without, again, crossing the courtroom threshold. More recently, in an a fairly brutal attempt to contain costs, the Lord Chancellor, Lord Falconer, issued a direction in 2005 stipulating that only £3 million is available in any one year for major multi-party actions. The Legal Services Commission (LSC) has now introduced an annual ‘affordability review’ to determine what major litigation it can do within that tight budget.



Sallie Booth, a partner at Irwin Mitchell, demonstrates just how small a community UK group action lawyers has become. ‘Last year there were six cases before the affordability review and we were involved in three,’ she says, adding that ‘all of them were turned down’. She says: ‘We were effectively competing against ourselves.’ Her firm has a number of group actions on its books at the moment, including Vioxx, compensation claims against Cadbury for alleged salmonella poisoning, those alleging exposure to polonium-210, a number of miners’ knee cases, and three victims of the recent Cumbrian rail crash.



It is in response to the perceived dire state of complex multi-party actions that the Civil Justice Council (CJC) recently proposed a self-financing supplemental legal aid scheme (SLAS) (see [2007] Gazette, 8 March, 4). It is a new spin on the old idea of a conditional legal aid fund that has being doing the rounds since the concept was first mooted by the Law Commission in 1962. The recent CJC forum, convened to discuss the report – whose authors included the LSC’s head of funding policy – favoured the model of a fund which took a capped portion of clients’ damages and, possibly, recovered costs as well. The report also considered regulated third-party funding and controlled contingency fees for multi-party consumer redress cases where no other funding was available.



Mark Harvey, a partner at the south Wales claimant firm Hugh James and a former secretary of the Association of Personal Injury Lawyers, believes that group litigation has now reached a critical crossroads. The solicitor is mindful of the failed Vioxx litigation, where his clients decided to bypass the UK courts and take their action to the US directly on the assumption that public funding would not be available. Other patients alleging that they had suffered heart attacks and strokes as a consequence of taking the withdrawn anti-arthritis drug, represented by Irwin Mitchell and Leigh Day, tried and failed to get funding in the UK before joining the US action. All clients are currently stuck in legal limbo following the decision of a New Jersey court at the end of last year which ruled that a UK venue would be more appropriate for the clients at the moment. There remains little prospect of funding on this side of the Atlantic.



‘We’re now at crunch time,’ Mr Harvey says. ‘We need one case to go to trial and win, supported by an appropriate means of funding. Now it would be wonderful if that was a conditional fee agreement with after-the-event insurance, because it might encourage insurers to back another. If we don’t get a couple of these cases to trial and win them, I think you could say goodbye to this area of law.’ His firm is also leading the national group litigation on behalf of several hundred people who allege withdrawal reactions through their use of the drug Seroxat and together with Irwin Mitchell is working on the miners’ knee litigation.



David Keegan, director of the LSC’s special investigations unit, which is responsible for funding complex litigation, has just conducted the latest affordability review. ‘I’m pleased to say that we’ve reached an agreement on Seroxat and also we’ve reached an agreement to jointly fund the miners’ knee litigation with the trade unions,’ he says. Mr Keegan acknowledges that his unit deals with ‘only a small number of firms’, mainly Hugh James, Irwin Mitchell and, to a lesser extent, Leigh Day, plus a number of other firms which specialise in child abuse cases.



What do the claimant lawyers make of the idea of a SLAS? The idea receives mixed reviews. ‘It is difficult in the 21st century to continue to justify why somebody should get a completely free ride,’ replies Mr Harvey, a CJC member. ‘If you borrow money, somebody is paying the interest and really legal aid is no different.’



Ms Booth favours the idea. ‘What you’re looking for is a fair system to all the parties which doesn’t encourage spurious litigation,’ she argues. ‘That’s why I don’t like the idea of a contingency arrangement but it is a question of striking that difficult balance. At the moment, there is a real risk of justice being denied.’



There was a bitter exchange of words between the LSC and Irwin Mitchell and Leigh Day at the end of 2005 following the former’s decision not to fund the Vioxx litigation. Mr Day accused it of ‘bloody mindedness’ and Mr Keegan criticised the lawyers for not being forthcoming with cost estimates, saying that the LSC was not in the business of ‘writing blank cheques’.



Mr Day reckons the SLAS is ‘alright as an idea’ but ‘marginal in its relevance’. He adds: ‘I just don’t see it as providing any serious level of funding.’ Leigh Day is advising former servicemen who took part in experiments at Porton Down (together with Kent firm Thomson Snell & Passmore), four of the men seriously injured during the TGN1412 drug trial at the premises of Northwick Park Hospital, individuals and businesses caught up in the Buncefield depot blast, as well as a toxic waste claim on the Ivory Coast.



He voices a sentiment shared with many of his colleagues from other firms in his ‘frustration’ at the bureaucracy in dealing with the LSC. In fact, he goes somewhat further than most. ‘I’d rather throw myself out of the window than deal with the LSC again,’ he says.



Nonetheless the LSC maintains that claimant lawyers are coming around to the new regime. ‘I feel we’re getting more realistic approaches from firms about their costs,’ says Mr Keegan. ‘We want them to be clear what the case is about, how much it’s going to cost, and have an understanding from the start.’ He flags up the miners’ litigation as an example of a new approach to funding. He describes the LSC as ‘a minority funder’ in the action, while trade unions such as the National Union of Mineworkers and National Association of Colliery Overmen Deputies and Shotfirers are funding their members.



Patrick Allen, senior partner of north London firm Hodge Jones & Allen, is concerned that the CJC’s proposal might be playing into the hands of a cost-cutting government. ‘The bottom line is you can’t trust the government not to take advantage of this sort of scheme,’ he says, echoing a worry expressed by many at the CJC forum. ‘If they saw another possible income stream coming in, then they might use that to reduce their own funding.’



Insofar as the CJC has identified a problem, the solicitor ‘wholeheartedly agrees’ with its analysis. ‘Yes, there’s a crisis in the funding of multi-party actions,’ he says. But chipping away at damages and solicitors’ costs could have a counterproductive effect. ‘If you took away 10% of the settlement in a catastrophic case, then you’ll be taking away 10% of the injured patients’ ability to fund future care and I have pretty profound problems with that,’ he says.



The solicitor also points out that claimant lawyers only get paid £70 an hour on the ‘risk rate’ for doing group action work under the legal aid scheme. And solicitors can only recover the market rate should they be successful. ‘The problem with class actions is that they are incredibly difficult, especially the pharmaceutical ones, and you would be committing yourself to five or six years’ of work. To do that at £70 an hour is a commitment not many firms would be prepared to make,’ he adds.



As most UK claimant lawyers seem to be despairing, it seems a curious time for the doyen of US class action lawyers to set up shop in London. Earlier in the year, Michael Hausfeld, a partner at Washington firm Cohen Milstein Hausfeld & Tol, arrived in London to oversee the opening of the firm’s European office, which he hopes will be the start of a network of sympathetic plaintiff lawyers. A recent profile in Forbes magazine described him as being ‘on a crusade to export America’s legal system around the world’.



‘We will specialise in more complex litigation,’ Mr Hausfeld recently told the Gazette’s sister magazine, Litigation Funding. The lawyer is best known for representing native Alaskans hit by the 1989 Exxon Valdez oil spill, Texaco workers in a record-breaking $176 million racial discrimination case, victims of the Holocaust in their action against Swiss banks, and South African victims of apartheid. ‘We are going to have our initial concentration in the competition area because that is where we feel that there is a great shortcoming in terms of European victims having access to justice and the means of restitution to which they are rightfully entitled,’ he said.



A Sunday Times profile this month began: ‘Big business beware.’ So could US lawyers ‘export the legal system’? ‘I think that is optimistic,’ replies David Greene, head of litigation at central London firm Edwin Coe. ‘Certainly in England he’d have problems with judges who are always going to maintain a conservative approach.’ Edwin Coe specialises in bringing group actions on behalf on shareholders. Mr Greene is currently acting for investors in Langbar International, the suspended AIM-listed firm under investigation by the Serious Fraud Office. His firm previously represented 49,000 investors in the Railtrack Private Shareholders Action Group and 32,000 shopkeepers from the Association of Convenience Stores challenging a decision by the Office of Fair Trading.



The funding is a major issue for commercial group litigation as well. ‘It used to be difficult to enter into a conditional fee agreement for a group as the regulations would require you to speak to every single person,’ he says, adding that was a major hurdle for an action like Railtrack.



Though the regulations changed in November 2005, Mr Greene reports that the availability of after-the-event insurance is more difficult for commercial than personal injury actions, ‘where the market is more mature and the potential downside not so huge’. In Railtrack, the shareholders had to make a £2.25 million payment into court to meet the government’s costs – a sum which almost prevented the action from going ahead.



One reason for the increasing interest in US lawyers is the changing attitude to group actions in the commercial sector. Mr Greene points to the new Companies Act, coming into force on October, which will introduce a new statutory derivative action, making it easier for shareholders to bring claims. He also notes this month’s proposals by Meglena Kuneva, the EU consumer affairs commissioner, which could see US-style actions being imported to Europe under plans to strengthen consumer protection. The commissioner is looking at a new system of ‘collective redress’, allowing European consumers to bring claims against providers of faulty goods or services. ‘In the US, 95% of regulation is done by private action in the courts, whereas over here it is exactly the opposite,’ Mr Greene says.



The lawyer points out that the European Commission has made similar proposals in the past in relation to competition claims. Those proposals include a US model of contingency fees, double damages, no cost shifting and an opt-out class process. ‘The trouble with that from an English point of view is that claimants have another difficulty persuading the courts from a single damages point of view, let alone double,’ he adds.



But there is clearly a mood in this direction, as witnessed by the Which? football shirts action – the first representative action being brought under relatively new rules in the Competition Appeal Tribunal. Plus the Department of Trade & Industry is also mulling over introducing representative actions in consumer protection cases.



Unsurprisingly, Mr Hausfeld gives short shrift to the notion that he is in the business of exporting US-style litigation. In response to a recent article in the UK press about the glass ceiling which holds back women professionals, he asked: ‘If there is any legal activity on behalf of those women to open up job opportunities, is that an Americanisation of British law? Or is it just the realisation that there is a violation of British law which has created a class of victims for whom there needs to be redress?’



Jon Robins is a freelance journalist