UK Supreme Court Risks Opening the Class Action Floodgates

11th Dec 2020

A major decision handed down today by the UK Supreme Court could drastically alter the litigation and business environment, making it easier for plaintiffs’ law firms and financiers to bring collective actions (known as class actions in the US).   

The Court’s Merricks v. Mastercard decision lowered the bar for the certification of class action lawsuits in the first major test of a new system created in 2015. The £14 billion collective action was brought on behalf of 46.2 million people—nearly every single UK consumer. The case alleged that all consumers between 1992 and 2008 paid inflated prices because of unlawful fees Mastercard charged retailers.  

The court overruled a 2017 decision from the specialized Competition Appeals Tribunal (CAT), which was created by the 2015 Consumer Rights Act to hear the type of cases like Mastercard. The CAT said the lawsuit was too sprawling and ill-defined to proceed.  

The CAT denied the case from moving forward because it found that the standard for certifying a “class” was not met, including because there was no obvious way to determine which consumers had lost or how any compensation could be calculated, proven, and delivered. The case was appealed to a higher Court, and then again to the UK Supreme Court. 

The Supreme Court nearly upended the CAT’s entire logic. It said the “most serious error” was to deny certification because the plaintiff had not shown how it ever could gather the data or evidence needed to establish such a broad claim. Instead, plaintiffs need only to present a “triable issue that the claimant has suffered more than a nominal loss.”  According to the Supreme Court’s ruling, the CAT should not worry about how “suitable” a class action lawsuit is to resolve the claim or consider how class members are compensated. Only that there is an issue. 

According to the ruling, the CAT will now reconsider its decision with this guidance in mind. 

The effects of the Supreme Court’s ruling are obvious. The CAT was designed to ensure that lawsuits brought under the Consumer Rights Act were reasonable claims that could be resolved through litigation. Unfortunately, this decision strips the CAT of that ability. Instead, the litigation floodgates might open, allowing lawyers and litigation funders to file dubious lawsuits intended to pressure defendants to settle. 

Despite the Supreme Court’s recognition that a certification step exists to prevent misuse of the litigation system, it is regrettable that, by setting the bar so low, its guidance on certification may prove to have precisely that effect.   

 

Note: This blog was cross-posted on the U.S. Chamber Institute for Legal Reform‘s website. The Institute for Legal Reform manages this website.