D (3:51)

There is definitely a trend globally towards a more litigious culture and increase in class actions. The UK Parliament in 2015 introduced a class action mechanism for alleged breaches of competition law. And there's been phenomenal growth in that type of class actions. So that on average, UK citizens are now members of more than 10 class actions.

A (4:15)

The UK is not alone. In Europe, between 2018 and 2023, more than $164 billion of damages were being pursued. Some settlements amounted to more than $100 million on their own. So how did we get so litigious? Where do these class actions come from?

B (4:34)

The very first ones were over church property. There was a schism in a congregation, and one side of the schism wanted a resolution to who owned the property.

A (4:46)

That's Brian Fitzpatrick, a professor at Vanderbilt Law School in Nashville. He's been studying the rise of the class action phenomenon from its ancient roots in medieval Britain to what you might call its current nerve center, the us where class actions have shaped legal history.

B (5:05)

One of the most famous ones was about civil rights. Brown v. Board of Education. It's a very famous case in the US about desegregating the schools. The US Supreme Court decided that blacks and whites being required to go to different public schools violated the U.S. constitution. One black person in Topeka, Kansas, sued the Board of Education on behalf of all of the other black people in the school district. That case was a class action.

A (5:37)

The lead plaintiff in Brown vs Board of Education was Oliver Brown. His youngest daughter, Cheryl, still recalls the day back in 1954 when the case was won. My mom was at home that day listening to the radio and ironing, and she heard the announcement. Our country needed this kind of sea change. African Americans used the law to gain

E (6:01)

access to their constitutional rights.

A (6:03)

Public schools, that was the tool to gain this access, there were so many things that we were barred from doing by custom and in states, by law. So my father stands alongside so many brave men and women in making this happen. Cheryl Brown Henderson talking there to the BBC World Service's Witness History program. This landmark ruling was, of course, just the beginning. There were other civil rights claims as well. But the whole landscape of class actions really changed when the courts agreed to allow a profit motive for bringing claims. Here's Professor Brian Fitzpatrick again.

B (6:41)

What happens in 1966 is the people who write the rules that govern the courts in the United States decided to tweak the class action and allow people to sue for money as well. And that's really what opens up the floodgates.

A (7:01)

And another shift in the law was also to come out of the United States. Claimants were able to opt in or opt out of some cases, which others were leading. Kenny Henderson from the law firm CMS

D (7:13)

explains opt ins are the traditional means of bringing class actions in Europe and worldwide whereby potential claimants choose to join the litigation. They'll respond to an advert or they'll go and see a lawyer, but they're making a choice to bring a claim. Opt out. Class action devices are really what we associate with US class actions, and that is where a claim is issued by a class representative and the class is aggregated automatically. So if you fall within the class definition, you are in the litigation unless you choose to leave it. And those devices are in a few countries as the us, Australia, Israel, and now they're increasingly coming to Europe.

C (7:50)

If you had told me when I started out as a litigator 18 years ago that class actions were going to be a significant focus of my practice, I probably would have laughed at you. No way. Europe. They're immune from this kind of US style litigation culture. But I've obviously been wrong.

A (8:08)

Sarah Batley is a partner with the international legal firm Jones Day.

C (8:13)

The area that we're seeing quite a lot of growth in is private actions for damages for breach of competition law, class claims relating to data protection, data privacy, particularly after a cybersecurity breach. But I think we're also still seeing a steady growth in what we might term the kind of traditional mainstay ways of group action claims. So things like product liability, those claims are increasing in their number and in their scale and in their complexity. And that trend is probably set to continue, particularly in continental Europe.

A (8:46)

UK lawyer Sarah Batley. This is Business Daily from the BBC World Service.

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C (10:22)

When businesses have done things wrong, or any public body, there is always a place for redress through the court system, and that's important. However, we see cases which are brought purely as an exercise in making money for the lawyers and funders who back them.

A (10:42)

That's Seema Kennedy. She's the Executive Director of Fair Civil Justice, a UK based group campaigning to improve the current litigation system for businesses and consumers alike. She's also a former UK government minister.

C (10:56)

There may be a case where there has been some wrongdoing, some mistake, etc. However, litigation is an extremely long, risky, expensive and extractive process. There are lots of steps which can take so that there is justice and redress for consumers before the very expensive process of going to law.

A (11:19)

Would you say that this is an international phenomenon?

C (11:22)

Yes, it really is. In England and Wales we've had this system of being able to band together to bring collective actions for centuries that was exported to the US and then they developed this phenomenon of the opt out. And this is a real issue because you have these enormous classes, most of the class members don't know they're part of the claim. And because there is no need to actually get people to sign up. You can bring claims for large amounts of money and Whether or not there's any merit in the claim, just the threat of it for however many billions of pounds that will sit in a business. So they will have to account for that somewhere formally in their books, but also just in the time of the amount of energy that they will have to spend defending it. And lots of overseas businesses which employ people, contribute to the Exchequer and are productive, are then being sued by claimant law firms and the funders behind them. And what we know from speaking to them is this is really making them think twice about investing, innovating new products and about growing. I'd say in Europe, the risk is quite uneven. So the uk, Netherlands and Portugal are the highest risk jurisdictions. Spain, the law is adapting and changing there. And in the other EU nations they have implemented various EU directives in different ways. And what that leads to is forum shopping.

A (12:54)

Forum shopping. That means that people are just jumping around between different jurisdictions to find the one that's going to suit them best.

C (13:00)

Exactly. So what they will do is they will say, right, where is there an opt out regime? Because that's easy to bring the claim. Where is it easy to raise money for litigation funding?

A (13:12)

So are you saying in practice what's happening is lawyers are kind of holding businesses to ransom? In other words, you point a gun at their heads and say, we've got 10 million potential claimants here, all of whom you may have to pay settle.

C (13:25)

There is definitely settlement pressure because these cases are litigated in the court, but they're also litigated in the media. And sometimes there will be pressure on certain companies just to settle to make the litigation go away.

A (13:38)

The thoughts of Seema Kennedy from the UK campaign group Fair Civil Justice. So how do defence lawyers themselves respond to the argument that they're simply profiteering at everyone else's expense? Steve Berman is something of a legend in this field, a go to guy, you might say, with past victories involving settlements running to tens of billions of dollars.

E (14:01)

I'm one of the go to guys, or persons, I should say, because obviously go to female lawyers as well.

A (14:07)

The landscape of class actions is changing fast.

E (14:10)

He says the change in class actions is mainly mimicking the growth of high tech. So if you look at the last four or five years, there are a lot of class actions involving tens of millions or hundreds of millions of people, because what big tech does impacts so many people. So take for example, I have a case here against Amazon. The judge approved a class of 300 million Americans. That's the largest class action in history. And it's so Big because Amazon, so big.

A (14:43)

There are hardly more than 300 million Americans out there. I mean, that is a big number.

E (14:48)

Yeah, well, I think there's 380. So it's, it's most of America.

A (14:52)

There is a claim that this is beginning to paralyze investment. It's beginning to paralyze industry.

E (14:58)

I've been hearing that for 30, 40 years and I haven't seen big industry paralyzed in any way. All the class action does is to make them accountable to follow the law and tell the truth. That shouldn't be paralyzing to any company. And second, I've seen class actions that have changed entire ways of doing business to the benefit of, of large groups of people. We recently settled for $1.5 billion and a change in practices. The way that real estate commissions are handled here in the U.S. just about everyone in the U.S. buys a home. And so our changing the way real estate commissions will be charged is going to have huge positive consequences for so many people.

A (15:40)

Is it not unbridled growth?

E (15:42)

It is not unbridled because you have judges and judges put the guardrails up. So it is not unbridled.

A (15:50)

And do you think that the way that they're viewed has gained a kind of celebrity? I mean, I'm thinking of the way that Hollywood has treated the subject, Erin Brockovich and other movies which, which have really brought it into focus, this kind of courtroom dynamic where it is a kind of David versus Goliath story.

E (16:10)

Well, that's why I got into it. I was working on a case for people who had lost a couple of billion dollars in bonds. And the defendants were all of Wall street, lawyers, engineers, dozens of lawyers from all over the country, the best and the brightest. And there were just a few of us plaintiff's lawyers. And it felt like David versus Goliath and I loved it.

A (16:30)

Class action lawyer Steve Berman and we should say that we have approached Amazon for comment on the class action case mentioned there. Amazon have confirmed to us that they are committed to fighting the case. Steve Berman feels there are adequate guardrails set by judges to ensure that the law is not abused. But some would like to see greater protections. Seymour Kennedy of Fair Civil justice says that in Britain lawyers have too much license to bring cases claiming no win, no fee, which is often a misleading description for litigants who can lose a lot of money in these complex, expensive and long winded claims.

C (17:10)

There are fees which are sort of hidden, so exit fees or the use of insurance. And of course the other thing we want to see is a much bigger emphasis on alternative routes to redress. We're not trying to block people from being heard and being compensated. What we don't think is that litigation is the answer to these questions. We would like to see a much bigger emphasis through businesses and government policymakers on the use of ombudsman and of alternative dispute resolution mechanisms in all their forms.

A (17:45)

In some ways, the arguments over class actions reflects a much wider question about the law itself. Is it really constructed in our best interests, or has it morphed into a mechanism that's only profiting a select few? Professor Brian Fitzpatrick in Nashville, Tennessee says he can't think of a better system for protecting the interests of those who will always struggle to protect themselves.

B (18:09)

There's no doubt about it, we could not survive as a court system if every single person who was injured by a product sued on their own and got their own trial. We have to consolidate them and, and we have to use this sample trial process because the judges would spend their entire lives trying to get through one of these mass actions if every single person had to have their own trial. At the end of the day, there's nothing wrong with making a lot of money if the way you're making it is to do good for people.

A (18:47)

But others, especially in Europe, say this relentless pursuit of lawfare over what are quite often very technical commercial claims risks incentivizing conflict and paralyzing enterprise. That should help everyone.

D (19:02)

There's some serious policy issues around the growth of these class actions because there's question marks over how much of the money goes to the class. In one of the earliest settlements of the UK competition class action regime, the settlement figure was up to 25 million pounds and only 0.8% of that money went to the class members. And that's, that's terrible.

C (19:24)

They can be an important tool for facilitating access to justice, but without proper, robust scrutiny and control by the courts, there is a real risk that they become revenue generating vehicles for the lawyers and funders who drive them.

A (19:40)

The thoughts there of the UK lawyers Kenny Henderson and Sarah Batley. And that's all from this edition of Business Daily. You can find plenty more episodes made by the team. Why not subscribe to our podcast? But for now from me, Ed Butler and my producer Craig Henderson, take care. With VRBoCare. Help is always ready before, during and after your stay.

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